Here is two most simple but powerful investment steps I am sharing to the readers. I am sure following this will help an investor to act intelligently to have powerful value investments. This is not a sharing any idea to select a business to invest but an idea that reveals what important steps an investor required to make.
Step #1: What to buy‘What to buy’ is totally dedicated to the requirement of identifying excellent businesses by taking required time. Considerations should be given to the strong economics and durable competitive advantages of products or services. An investor standing on the ‘what to buy’ step need not required to worry about the present prices of the shares of the business or any type of market fluctuations. But, required to totally dedicate to find the right businesses.As an investor standing in this step, there will not be any time frame for you to identify a or more best businesses. But, you are determining your time to identify the same to move further to the next step. Once you are comfortable with very strong businesses in your hand, then only move to the second step.
Step #2: When to buy
This is the next possible step after the first. You always reaching to this step with some of the very best businesses in your hand. Yes, these are the business you have found through well research and study in the first step. The truth is, you never bothered about its prices, whether it was high or low, at the time of doing research in the first step. Now this is the step to focus on the price side to buy your intended business.To get the right answer and time to buy, you should know the following 2 important points:1. The price you are paying always decides your rate of returns.As an example, suppose, you know the share prices of a business going to touch $50 per share later but no information on when it is. With this context, you start waiting to reach its price maximum down by the influence of any macros economic factors and finally paid a price of $25 per share. You start holding the same till it reaching to $50. You sold it and got the bonanza of flat 100% profit with your prudence and patience.In the same time, someone else also bought the share immediately after knowing the future status of reaching $50. But, he never wait for any time to buy and bought the share immediatly by paying the present stock market price. Thus he bought the share in a price of $47.50 per share and sold when the price reached to $50. Of course, he also have got a profit but compare with your 100%, he got only 5% profit.This example revealing a great truth of knowing the time to buy a right stock. The answer is very simple. Buy when public are panic. Have an eye on market when you hear any temporary news possible generating by any macro economics factors, such as general elections, political changes or economic recessions etc.. There will be huge fluctuation in the stock market and probably you will get good stocks in a right price to buy.2. The second point you should remember is, buying a wrong business with cheap price always give you lose. Once if you have a good business in your hand to by then, remember, buying an excellent business with high price also will give you lose. There is no need to explain more on this once if you had read the last sentence of previous paragraph.Remember, once after finding a right business to buy, some time it may take years to buy the shares in the right prices. Patience and prudence are the two most required qualities by an investor who practicing this investing style.Welcome your feedback and also if you have any doubts.